Banking Crisis Raises Concerns About Hidden Leverage in the System
- Loans have been layered up during era of low interest rates
- Deeper probes, stress tests likely after recent bank turmoil
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As traders rush to identify where the next bout of volatility will come from, some watchdogs think the answer may be buried in the huge pile of hidden leverage that’s been quietly built over the past decade.
More than a dozen regulators, bankers, asset managers and former central bank officials interviewed by Bloomberg News say shadow debt and its links to lenders are becoming a major cause for concern as rising interest rates send tremors through financial markets. Federal Deposit Insurance Corp. Chairman Martin Gruenberg and BlackRock Inc. Chairman Larry Fink have called for more scrutiny in recent public comments.